The European Commission is set to unveil a package of measures this week aimed at reducing the European Union’s dependence on critical raw materials from China, amid intensifying global competition with the United States and Asia, Reuters reports.
European officials and industry representatives warn that despite repeated signals highlighting vulnerabilities in global supply chains, European governments have acted too slowly. This delay is particularly consequential in a rapidly changing global market and in the context of a resurgence of protectionist policies reminiscent of former U.S. President Donald Trump.
Christine Lagarde, President of the European Central Bank, recently stressed that Europe has become vulnerable due to its reliance on third countries for supply security and essential raw materials. She warned that the EU’s economic model “was designed for a world that is gradually disappearing.”
Concerns have intensified following China’s threats in recent months to impose additional export restrictions on rare earth elements, critical for the automotive, green energy, and semiconductor sectors. Beijing indicated potential limitations in April and again in October, raising the risk for European industries.
The economic security plan, set to be presented on Wednesday, includes a dedicated initiative for critical raw materials called ResourceEU, modeled on RePowerEU, which targeted reducing dependence on Russian gas. Unlike gas, critical raw materials cannot be easily substituted, and China dominates both extraction and processing at significantly lower costs.
The European Commission and industry representatives emphasize the need for a swift decision on how to finance the development of the EU’s own supply chain—from extraction and processing to storage. As an immediate measure, officials propose allocating €3 billion from the EU budget to the first 25 of 60 strategic projects identified by the Commission. These projects aim to produce rare earths, gallium, germanium, and lithium.
Long-term financing remains a challenge. Companies are requesting guaranteed minimum prices or other investment protection mechanisms, options currently under consideration by the European Executive. The EU is relying on support from the European Investment Bank and the Global Gateway program for projects in third countries, while the Innovation Fund will include critical raw materials investments as eligible projects. Nevertheless, the private sector remains skeptical about the pace and effectiveness of these measures: “Time is against the EU. They have been too slow,” says Mika Seitovirta of Sibanye-Stillwater.
In addition to competition with the U.S., Japan, Canada, and Australia, which are investing heavily in diversifying supply chains, the EU is pursuing domestic resource development, including in Norway. Success depends on accelerated permitting processes and price security mechanisms, explains Alf Reistad, CEO of Rare Earths Norway.
Brussels is exploring partnerships with Brazil, Central Asia, South Africa, and Australia, but many political agreements have not yet translated into actual investments. Meanwhile, recycling is becoming a key pillar of Europe’s strategy, given the limited number of active mines and the long time required to develop new extraction sites.
The EU has also launched a pilot joint storage mechanism for critical raw materials, aimed at optimizing prices and ensuring supply security. Decisions regarding the types of materials, volumes, and storage locations will be made following the operational launch of a new European Critical Minerals Center, modeled on Japan’s approach, scheduled to become operational next year.
